The Lowdown │ Global Markets to 8 November 2020

The Lowdown Global Markets to 8 November 2020

Published November 9, 2020


  • The Democrats win the election and Joe Biden readies himself to become the 46th president of the US. Kamala Harris will become the first female vice president and the first black South Asian to hold the title.
  • The Democrats may have won the White House, but the story is different in the Senate and the House of Representatives.
  • Covid cases continue to rise as the UK enters its second official lockdown. Biden gets to work on convening his coronavirus task force.
  • Global equity markets continue to rally on the back of an eventful week: the tech-heavy NASDAQ does particularly well.
  • While the global economy and the stock market will become disconnected in 2021, many investment opportunities will emerge in this ever-changing world.

Global Market Summary

The Democrats have won the election and Joe Biden is now readying himself to be sworn in as the 46th president of the US, while Kamala Harris is gearing up to become the first female vice president.
And as the daughter of Indian and Jamaican immigrants, she will become the first black South Asian American to hold the title – a significant step forwards for equality. Her new role will also place her in a strong position to have a shot at the presidency at some point in the future, should she decide to run.
As the pandemic has raged in the northern hemisphere – with substantial increases in cases and fatalities – this presidential election campaign has been marred by extremely bitter exchanges between the Republicans and the Democrats. At the time of writing, although Biden has been declared the winner, President Trump has yet to concede, alleging electoral fraud and retaining an army of lawyers to help him hang onto the White House.
Incontrovertibly, however, this election has seen a record turnout for both candidates: Biden has so far won around 75 million votes overall (the most won by any candidate in US history) while President Trump has nearly 71 million (the most that any losing president has ever secured).
But neither a Blue nor a Red wave swept across the country: there was no sign of the landslide victory that so many pollsters predicted.
The Democrats may have the Oval Office, but the Republicans look set to retain the Senate, while the House of Representatives appears split.
A divided government will likely mean a watering down of some of Biden’s firmly-rooted policies – such as sharp tax increases, the Green New Deal and a large stimulus package.
But Biden’s first challenge will be to bring Covid-19 under control in the US: this week, he is expected to announce his coronavirus task force, which will be charged with formulating a plan to curb the spread of the disease (which has reached record levels in the US).
He has also vowed to rejoin the Paris Accord on Climate Change on his very first day in office. Although he does not fully embrace the Green New Deal, he is proposing US$1.7 trillion of federal investment into green technology research (a figure which will not overlap with the economic finance plan). This will underpin substantial spending over the next ten years, also aimed at taking the world’s second biggest carbon emitter to net zero by 2050 – a commitment made by more than 60 other countries last year.
Meanwhile, a new stimulus package should be announced very soon, and global trade relationships are set to improve under a Biden presidency. Although some US trade pressure will continue to be applied to China, Beijing will most likely welcome more convivial ties with the new administration. Similarly, many other influential global leaders will be looking forward to stronger relationships with the US after four years of turbulence under Trump.
Although it is impossible to make any meaningful predictions at this early stage (Biden will not be sworn for over 60 days), with neither party having a controlling position in either the White House or the Senate, we are likely to see the financial markets embracing this Goldilocks scenario.
So we will probably see Treasuries rise on the US bond market (particularly with the prospect of more government spending), while we expect the US dollar to weaken over time. But in our opinion, global equities will continue to do well over the longer term.
With Brexit, the pandemic and the extraordinary US election we have just had, 2020 has been an extremely challenging year. The Covid-19 fatalities in countries all over the world, the enforced lockdowns (leaving millions perplexed, uncertain about their futures and unable to see loved ones) and the transition over to remote working have all tested our patience.
But 2020 has most definitely added fuel to the fire of technological revolution – a revolution that was already under way through enterprise and innovation. This has reinforced our belief that a global and thematic approach to investing – both now and over the coming decades – will deliver meaningful returns.
There is every likelihood that we will remain in a low-interest rate, low inflationary and rather subdued growth rate environment for some time to come. This will pose some challenges for investors: regular bouts of volatility and uncertainty will continue to affect market sentiment. But we see this as an opportunity to embrace change and create returns.
Our focus is firmly on fundamental and constructive analysis within our fund selections that form the bedrock of our portfolio strategies. More than ever before, our focus in 2020 on capturing the themes of the future, such as technology and healthcare, has delivered commendable returns and is likely to carry on doing so.
Many of these themes are set to further evolve over the coming decades. Digital disruption, for example, will ultimately affect all global sectors. But perhaps the biggest change and investment focus will be in relation to climate change and sustainable investing (the Green Revolution). We will doubtless be taking advantage of this as well in our portfolio strategies in the years ahead.